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Dynamics of Persistence in International Inflation Rates
Author(s) -
KUMAR MANMOHAN S.,
OKIMOTO TATSUYOSHI
Publication year - 2007
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2007.00074.x
Subject(s) - persistence (discontinuity) , inflation (cosmology) , economics , long memory , dynamics (music) , monetary economics , econometrics , keynesian economics , macroeconomics , psychology , physics , geotechnical engineering , theoretical physics , pedagogy , volatility (finance) , engineering
Characteristics of inflation play a key role in policy formulation and market analysis. Several studies have analyzed inflation persistence and reached diverging conclusions. In this paper, we investigate the dynamics of inflation persistence using fractionally integrated processes and find that there has been a clear decline in inflation persistence in the United States over the past two decades. We also show that the presence of fractional integration in inflation successfully explains previous diverging results. Lastly, we provide some international comparisons to examine the extent to which there has been a commensurate decline in inflation persistence in the other G7 economies.